Employee fraud cost UK businesses £40m last year

Organisations urged to rethink whistleblowing policies to catch wrongdoers

Businesses reported more than £40m in losses from employee fraud last year, figures published today have revealed.

The data, which was obtained by accountancy firm RSM under a freedom of information request, also showed that employers reported more than 800 incidences of frauds from inside their organisation in 2016-17. Employee frauds include falsifying claims for travel and subsistence, creating bogus customer records or simply stealing cash.

Akhlaq Ahmed, forensic partner at RSM, warned that the figures were likely just the “tip of the iceberg”, because a lot of employee fraud goes unnoticed. He urged employers to review their whistleblowing policies to give themselves the best chance of catching fraudsters.

“Unfortunately, we have seen examples recently in which poorly managed whistleblowing incidents have been ignored or where whistleblowers have been exposed or criticised,” Ahmed said. “Embedding an effective whistleblowing culture is heavily reliant on the right tone being set from the top. Ultimately, if employees feel confident enough to raise concerns, companies can help protect themselves from fraud losses and conflicts of interest in addition to any resulting regulatory or legal action.”

Meanwhile, Emma Ahmed, professional support lawyer in the employment team at Hill Dickinson, warned: “The most serious and damaging employee frauds are often committed by longstanding senior employees who abuse their position of trust in the business and treat the company’s cash as their own. Such frauds are often extensive and can run into hundreds of thousands of pounds.”

Research by not-for-profit fraud prevention organisation Credit Industry Fraud Avoidance System, published in May, revealed that almost half (47 per cent) of insider frauds were uncovered by internal controls and auditing, while a fifth (17 per cent) were thwarted by line managers or whistleblowing.

The information obtained by RSM also revealed that greater London was the worst affected area for employee fraud last year, with £7.1m in losses reported to the Metropolitan Police caused by 93 incidences of fraud. Meanwhile, the City of London Police received reports of £4.7m losses caused by 14 incidences, and the police in Essex dealt with reports of £4.4m caused by 28 incidences.

According to Office for National Statistics data published in July, fraud accounted for 3.4 million – or roughly 31 per cent – of the 11 million crimes reported in the UK in the year to March 2017.